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Factors That Make B&G Foods (BGS) an Appetizing Stock Now

Zacks

B&G Foods, Inc. BGS appears to be in solid shape, courtesy of consumers’ rising demand for its products amid coronavirus-led pantry loading. Notably, the burgeoning demand aided the company’s first-quarter 2020 results, wherein both top and bottom lines rose year over year and beat the Zacks Consensus Estimate.

We note that B&G Foods’ shares have gained about 13% since the earnings release on May 5. Moreover, the Zacks Rank #1 (Strong Buy) stock has rallied 23.2% so far this year, against the industry’s decline of 12.6%. On that note, let’s delve deeper into the factors that have been working well for B&G Foods. You can see the complete list of today’s Zacks #1 Rank stocks here.

Coronavirus-Led Demand Bodes Well

B&G Foods’ first-quarter results were backed by solid pricing and gains from buyouts along with increased demand led by the COVID-19 outbreak. The company has been witnessing a rapid increase in demand for its products since the second half of March 2020, thanks to the coronavirus-led stockpiling and higher at-home consumption. In this regard, B&G Foods’ higher net sales to mass merchants, warehouse clubs, supermarkets, wholesalers and e-commerce consumers have more than offset lower demand from Foodservice clients. Management informed that solid retail consumption was a major driver.

As reported by Nielsen, consumption for all of B&G Foods jumped 12% for the 13-week period ended Mar 28 – including an 87% surge in the last two weeks of March. Moreover, this trend continued in April as net sales during the month increased 60% year over year. The burgeoning demand trend also continued till May beginning. On an encouraging note, management anticipates net sales and adjusted EBITDA for fiscal 2020 to significantly exceed the guidance provided in February. Food companies like Kraft Heinz KHC, TreeHouse Foods THS and Kellogg K have also benefited from increased demand prompted by coronavirus-led stock piling.

BG Foods, Inc. Price, Consensus and EPS Surprise

BG Foods, Inc. Price, Consensus and EPS Surprise

BG Foods, Inc. price-consensus-eps-surprise-chart | BG Foods, Inc. Quote

The Zacks Consensus Estimate for B&G Foods’ second-quarter and 2020 earnings per share have surged 59.5% and 19.2% to 59 cents and $1.99, respectively.

Pricing & Buyout Gains

B&G Foods has been gaining from its buyout contributions for quite some time now. Incidentally, Clabber Girl contributed to first-quarter 2020 top line by $18.7 million. Apart from this, the company has acquired notable brands such as Back to Nature, Green Giants, Victoria, Mama Mary, Specialty Brands, McCann’s and Ortega. Markedly, Green Giants has emerged as one of the leading brands of the company. During the first quarter, net sales from Green Giant products (including Le Sueur) increased 16.3%. The company is driving growth in its plant-based innovation by Green Giant and has a robust pipeline and new product innovation lined up, especially for this business.

Apart from this, B&G Foods’ strategic pricing initiatives have long been playing an important role in strengthening revenues and profitability. During the first quarter, the company’s net sales benefited from a rise in net pricing to the tune of $9.2 million.

We believe the aforementioned upsides are likely to help B&G Foods counter cost-related headwinds as well as softness in the foodservice business amid the coronavirus-led stay-at-home trends.

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